Milwaukee developer aims to improve city living

The interior of an apartment features large windows with styles to blend in with the historical quality of the building. Dahl uses recoverable historical local items in commercial properties and apartments he is developing. Credit: Rick Wood

Joe Dahl understands that King Drive, just north of Center St., isn't going to register with some people as the best place to invest $140,000 in buying and renovating a commercial property.

That's OK with Dahl. It reduces the competition from other prospective property buyers - even if the location makes it difficult to obtain financing.

Less than six months after buying the vacant building, Dahl has tenants in all three apartments, along with his property management firm and another business occupying the street-level commercial space.

He's now planning to buy a neighboring building and repeat the process. That would follow a formula Dahl has used in owning and managing apartment buildings in central city neighborhoods, including Brewers Hill and Lindsay Heights, that are in better shape than much of Milwaukee's inner core.

"My target isn't to attract people who live in that area," Dahl said. "It's to make a product so nice that people are attracted from other areas."

In the 5,000-square-foot building at 2714 N. King Drive, Dahl renovated the upper floor into apartments that include granite countertops, hardwood floors and new kitchen and bathroom fixtures. The property includes a fenced-in patio and garden for the residents, who moved there from Whitefish Bay, Brewers Hill and the Marquette University neighborhood.

"The biggest thing you have to do is provide a safe environment," said Dahl, who secured the rear parking lot with a chain-link fence topped with barbed wire.

It helps that much of the block has already been redeveloped with various phases of King Drive Commons, a multi-building apartment community with street-level commercial space, including a new Growing Power food market and deli. There's also a renovated commercial building that features a BMO Harris Bank branch among its tenants.

Those buildings were developed by Martin Luther King Economic Development Corp., a nonprofit group led by Welford Sanders. Without Sanders' efforts, Dahl said he wouldn't have considered investing on the block.

"It's about building on the momentum," Dahl said.

Sanders has "really created an environment where people are willing to take a second look," Dahl said.

Diversity of incomes

Dahl's investment has created one- and two-bedroom apartments with monthly rents of $750 to $850.

Similarly sized apartments at King Drive Commons typically rent for about $600 a month, Sanders said. Those apartments were financed in part with federal tax credits, and are provided at below-market rents to people earning no more than 60% of the Milwaukee-area's median income.

Dahl's apartments are bringing a diversity of incomes to the neighborhood, while also providing a home for street-level businesses, Sanders said.

Dahl, 32, was working at University of Wisconsin-Milwaukee's information technology department when he began investing in real estate.

He was living in the Riverwest neighborhood and found that his landlord, Dennis Miskowski, owned several apartments in that area. The two men started talking, and Dahl found a mentor who was willing to teach him about the trade.

Dahl learned to value apartment buildings based on the amount of rent revenue they generated above their monthly operating expenses, as opposed to assuming that a property could be quickly resold at a higher price to another investor. That helped keep Dahl out of financial trouble when real estate prices fell during the Great Recession.

He also learned how to spot bargains when foreclosed homes were put on the sale block.

Lender steps up

Dahl, who in 2011 earned a master's degree in business administration at UWM, figured the lending relationships from his nine years in commercial real estate would help him obtain financing to redevelop the King Drive building.

Instead, Dahl found that lenders weren't interested. One banker was eager to do business when Dahl described the projected revenue from the redeveloped building, but backed away when he learned that it was on King Drive.

So Dahl turned to the Milwaukee office of Local Initiatives Support Corp., a nonprofit group that supports community development.

"Had LISC not stepped up to the plate," he said, "this deal would not have gotten done."

The New York-based group, funded mainly by foundation grants and loans from banks and other commercial lenders, provided a $72,000 loan to help finance Dahl's $90,000 purchase. The group's Milwaukee office has focused much of its efforts on the Harambee neighborhood, an area that includes Dahl's King Drive property.

The property had been assessed at $119,900 before Dahl bought it. But it had been empty since the previous tenant, Wisconsin FACETS, a nonprofit group which leased most of the building, moved in August 2011 to The Tannery office park in Walker's Point because it needed more space.

After buying the property in May, Dahl spent about $50,000 to remodel the building, which was built in 1916. That was financed mainly by the cash flow from his other apartments.

He decided to shift the focus of the building to a residential use after concluding that relying on a commercial tenant to lease the entire property "didn't seem like a sound business proposition." Along with Dahl's business, the street-level commercial space is rented to an event planning firm.

Dahl now has a purchase offer pending for a neighboring property, at 2722 N. King Drive, where a tavern recently closed on the street level. That 8,500-square-foot building includes four apartments on its second and third floors that Dahl would remodel, with rents similar to those next door.